01/30/2012

British Airways' Business Environment

British Airways is the United Kingdom’s largest international scheduled
airline flying to 148 destinations around the world. The airline is considered
as one of the world’s leading scheduled premium
international airlines. The airline’s principal place of business is
Heathrow. Aside from scheduled passenger services, British Airways also operates
a worldwide cargo business (British Airways 2009).

SWOT
Analysis

SWOT analysis is a management tool that aids in the identification of
organizational strengths, weaknesses, environmental opportunities, and
threats (Jones and George, 2003). Through the SWOT analysis, the organization
will be able to produce an organized inventory of factors that are potentially
relevant to the firm’s strategic situation (Saloner, et al 2008).

Strengths

One
of the strengths of British Airways is its acquisition of modern, top of the
line fleet of aircrafts. These aircrafts are aimed to improve the airline’s
product and service offerings thereby increasing the number of passengers. The
acquisition of modern aircrafts also allows British Airways to go head to head
with their major competitors and to service wider
markets. The company’s
human resources is also considered as one of the company’s strengths. As a
progressive, high performing organization, British Airways recognizes that
engaged employees are more committed to organizational values and more willing
to embrace change and improve customer service.

Weaknesses

One
of the weaknesses of the company is its weak
marketing campaign and strategy to encourage repeat purchase and customer
loyalty. There is a need for British Airways to come up with marketing
strategies that will attract more passengers.

Opportunities

The
completion of Terminal 5 is expected to strengthen and improve customer
experience, continue to make the business more cost effective, grow British
Airways’ operations and make
corporate responsibility a prominent part of the
business. The company is also in the process f improving its products and
services which is expected to attract more passengers.

Threats

One
threat for British Airways is intense competition. The airline operates in
highly competitive markets. British Airways face direct competition from other
airlines on its routes, as well as from indirect flights, charter services and
from other modes of transport. Some competitors have cost structures that are
lower than British Airways’ or have
competitive advantages such as government support. Another threat is that
the airline’s suppliers, in which the airline is highly dependent, are in a high
risk of business failure because of the present economic condition. The failure
of a key supplier may cause significant disruption to the airline’s operation.
Safety and security is also a threat for British Airways. Failure to prevent or
respond to a major
safety or security incident could adversely impact the airline’s operations
and financial performance. Another significant threat is further deterioration
in the global economy. If the global economy continues to decline, the financial
position of British Airways will be affected.

PESTLE
Analysis

The
airline industry is highly competitive and regulations are heavily implemented.
Aside from these, the airline industry also faces different challenges brought
about by drastic changes in customer behavior affected by different external
factors such as economic condition.

The
PESTLE analysis is used to identify forces in the macro-environment that are
affecting the business at present and are likely to continue to affect the
business in the future (Haberberg and Rieple 2008). The PESTLE analysis is used
as tool for analyzing a company’s macro-environment. Macro-environmental
analysis is interested in factors in the wider environment that influence the
demand for the product or service offered by a company; demand for the product
or service; the manner in which the product or service is distributed; the price
that is charged for the product or service; as well as the manner in which
organizations compete with each other (Haberberg and Rieple 2008).

Political
Analysis

The
airline industry is highly regulated. The airline business in influenced and
governed by tight regulatory controls. Almost every airline business operation
and decision is influenced by regulations and policies. Regulations are applied
in the routes that an airline chooses to fly, the business partners the airline
works with, the airport slots it uses as well as the fare it sets and the
infrastructure costs it pays. Another area which is heavily regulated in safety
and security. In recent years, the environmental impacts of an airline is also
subject for regulations and policies. Governments around the world introduced a
range pf security measures in order to fight the threat of terrorism and illegal
immigration. Airlines continue to engage with different governing bodies such as
the European Union and national governments to ensure safety and security while
causing minimal inconvenience to customers (British Airways 2008).

Safety Standards are strictly implemented in Europe by the European Union. The
International Aviation Organization (ICAO) is one of the governing bodies
concerned with safety standards. The European Union, being a regulatory body in
Europe published a list of airlines that failed to meet the safety standards set
by ICAO. These airlines are banned in Europe (Department of Transport 2009).

Economic
Analysis

The
airline business is highly sensitive to any economic downturn. Economic downturn
causes business travel, which is considered as the bread-and-butter of the
airline industry, to drop significantly. The global recession in 2008, has
tremendous impacts on the airline industry. There are a number of factors that
affected the business of British Airways – prices increases in oil and
commodities, collapse of sterling, unprecedented financial crisis experienced by
the United Kingdom. Consumer and business confidence on airlines declined
because of rising unemployment, uncertainty in the capital markets, a continuing
squeeze on credit, the erosion of household budgets and falling house prices.

Social
Analysis

Significant decline in consumer demands and changes in consumer behavior are
being experienced by airlines around the world. This is due to the global
recession. Because of the decline of global economy, consumers from premium,
business and individual categories are choosing to cut back on air travel
expenses. Consumer confidence is also declining. Though many customers continue
to see a first holiday as an essential rather than a luxury, most are cutting
back on second and third holidays and short breaks.

Business travelers and individual passengers are choosing trusted airline
brands. Customers seek assurance that their journeys will go smoothly. The
downturn in the economy is also pushing the consumers to be more
price-sensitive. Consumers are looking for value for money, demanding excellent
levels of service and high quality standards at lower costs. Consumers also tend
to be less loyal than before. They are more willing to try out other or new
airlines, which offer real value. Technological advances such as the internet
and mobile phones are helping the consumers to make informed choices. Consumers
are using price comparison sites and seeking out personal recommendations on
service and quality before booking their trips (British Airways 2008).

Technological Analysis

Internet, mobile phones and PDAs are tools that passengers use in checking-in.
Maintaining a corporate website which also handles customer queries and
reservations is also becoming a new requirement for airlines. Technological
advances that aim to reduce environmental damage caused by airline operations
are also increasing as well as innovations that aim to improve service and
passenger experience.

At
present technological advancements especially capacity enhancing technologies
and environmental mitigation technologies are continuously introduced. Some of
the technologies that are being developed now in the aviation industry are
Arrivals Management System, Departure Manager System and technologies that
address wake vortex effects.

An
arrivals management system (AMS) is an air traffic management automation tool
designed to optimize traffic flow in and around the Terminal Maneuvering Area
(TMA). There have been developments in the United Kingdom and across Europe
regarding arrival managers and associated tools. Departure Manager Systems (DMS)
have also been a focus of research and development. Boeing
in the year 2000, has announced the development of aerodynamic techniques which
cause the wing tip wake vortices from an aircraft to collide with each other a
short distance behind the aircraft, resulting in them dissipating more quickly
(Little 2000).

Legal
Analysis

The
airline industry is becoming increasingly regulated. The scope of such
regulation ranges from infrastructure issues relating to slot capacity and route
flights, through new environmental and security requirements.

Environmental Analysis

Some of the environmental issues that the aviation industry faces are noise, air
pollution, land take, water pollution and waste management. Aircraft noise has
the potential to affect the quality of life of at least half a million people
living close to UK airports. Aircraft, airport vehicles and rod traffic to
access airports emit air pollutants, such as nitrogen oxides, fine particles,
carbon monoxide and hydrocarbons. Building an airport inevitably takes land away
from its previous uses. In particular, it can affect wildlife habitats,
landscape and heritage (Parliamentary Office of Science and Technology 2003;
Friends of Earth 2006).

Like many organizations today, British Airways face several environmental issues
such as climate change. Governments and policy makers are now creating
regulations and policies that will require airlines to curb emissions growth.
All airlines have to meet a comprehensive range of local, national and
international environmental regulations (British Airways 2007).